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Salesforce.com buying Indy's ExactTarget in $2.5B deal

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San Francisco-based Salesforce.com said Tuesday morning that it is acquiring ExactTarget Inc.for $2.5 billion in cash.

The purchase price is $33.75 per share—a whopping 53-percent premium to where ExactTarget shares closed Monday.

The tech industry has been buzzing for weeks that Indianapolis-based ExactTarget would be purchased by a larger company that wanted to bolster its digital marketing platforms. An analyst told IBJ in March that Salesforce was the front-runner.

“Salesforce needs a strong email marketing capability, and they don’t have that right now,” said Nathan Schneiderman, a senior research analyst for Roth Capital Partners of Newport Beach, Calif., said at the time.

The deal caps a meteoric rise for ExactTarget, which was founded in 2000 and went public last year. ExactTarget employs 1,800, most of them in downtown Indianapolis.

The company started as a permission-based email marketer and remains a leader in that field. But over the last two years, it has broadened its marketing offerings beyond email to help clients bond with customers through mobile, social media and websites.

To help establish itself as a one-stop shop for marketing technology needs, ExactTarget last fall made two major acqusitions. It paid $96 million for Atlanta-based Pardot LLC, broadening its reach into business-to-business digital marketing, and $21 million for Carmel-based iGoDigital, which helps companies like Amazon and Wal-Mart recommend products to customers based on their personal information, their previous buying habits and their online queries.

ExactTarget co-founder and CEO Scott Dorsey said the sale to Salesforce, the largest customer-relationship-management software company in the world, will accelerate ExactTarget's expansion.

"ExactTarget's mission is to revolutionize how businesses connect with their consumers using data-driven digital marketing across all channels," Dorsey said in a statement. "Salesforce.com's tremendous strength in social marketing, along with its leadership position in sales and service, not only will accelerate this vision, but also provide our customers with a powerful, integrated CRM platform to transform their end-to-end customer experience."

Salesforce CEO Marc Benioff said the purchase positions his company to capitalize as business clients ramp up their marketing spending. By 2017, he said, spending by chief marketing officers is expected to surpass spending by chief information officers.

"The addition of ExactTarget makes Salesforce the starting place for every company and puts Salesforce in the pole position to capture this opportunity," he said in a statement.

ExactTarget shares are in for a big boost Tuesday. In morning pre-market trading, shares already had risen nearly 53 percent to $33.73—almost exactly the price Salesforce.com promised to pay per share in the acquisition deal. The share price hovered at that level through mid-morning.

Shares of Salesforce had slipped by about 3 percent by mid-morning to $39.73.

Salesforce has spent at least $4 billion over five years on more than acquisition 40 deals, including ExactTarget as well as social-media marketing firms Buddy Media Inc. and Radian6 Technologies Inc. Benioff’s push into marketing software has been slow to take hold, Brent Thill, an analyst at UBS AG, said last month, when Salesforce forecast quarterly profit and sales that missed analysts’ estimates.

“We couldn’t just keep making these small acquisitions—that strategy was taking, honestly, too long,” Benioff said Tuesday on a conference call. Benioff said that he now plans to take a break from doing deals for the next 12 to 18 months.

ExactTarget hasn’t reported a profit since 2008 and is forecast to post losses this year and next, the company’s revenue has increased every year since at least 2007, according to data compiled by Bloomberg.

“This is an excellent move and fit for Salesforce.com, and we consider the price paid reasonable given ExactTarget’s leading market position and growth profile,” Nathan Schneiderman, an analyst at Roth Capital Partners, wrote in a research report Tuesday.

ExactTarget gets 80 percent of total revenue from e-mail, filling a “huge hole” in Salesforce’s current offerings, he added.

Salesforce’s purchase of ExactTarget would be the biggest e-marketing takeover since 2008, when Google Inc. completed its acquisition of DoubleClick Inc., according to data compiled by Bloomberg. Salesforce is paying about 7.6 times revenue, compared with the median of 1.9 times revenue in a survey of more than 70 similar deals, the data show.

 

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  • CRM + MA = logic
    This move has left major competitors to ExactTarget like Marketo and HubSpot in the lurch. It has also guaranteed Salesforce major revenue boost as it will see a whole bunch of users migrating from other MA products into salesforce. It also reiterates the need of the hour of the presence of marketing and email automation in CRMs for large enterprises (like this Salesforce+ExactTarget merger) and CRMs for small businesses(AgileCRM). In fact, Agile CRM provides marketing and email automation built on top of the CRM, as well as social integration. After all, any CRM without automation and social features are going to be left far behind in the race. But I guess at the end of the day, considering the price Salesforce has paid, and the features Exact Target comes with(Pardot and iGoDigital), salesforce has gained much ground. I would love to hear what Marketo has to say about this.
  • It matters
    Where a headquarters is located DOES matter. It matters in terms of local philanthropy, city image, etc. Someone mentioned that you can fly direct from Minneapolis to Paris. I would be happy if I could get direct flights to non-hub cities in the United States from Indy. Its sad and pathetic that you can't fly direct from Indy to San Francisco, Austin, Portland, Seattle, etc.
  • Odd...
    The idea that it doesn't matter where a company's headquarters is located is silly. It's not just the impact of that company's hiring, it's the businesses that are created to support those employees as well. Take Minneapolis, for example. Physically, the downtown area is quite similar from Indy, but I was amazed by the number of beautiful hotels, great restaurants, clubs, shops, not to mention that you could fly direct to Paris. So what's the difference? Ten-plus Fortune 1000 headquarters in the immediate vicinity, for a start. So, yeah, it matters.
  • And
    To scott's point, it was reported in this very paper in February of this year that ExactTarget had a deal on the table for tax breaks in exchange for creating a specific number of jobs at specific salaries (one assumes those jobs were to be created here, but with the business acumen of this legislature, who knows). The IBJ needs to follow up on that.
  • Really?
    Anon, I salute your optimism but you've clearly never been involved in an acquisition before. This is, indeed, a great day for thouse who profit directly but a loss for Indianapolis and its fledgling developer community as it confirms that the west coast is still undeniably where the tech money is.
  • hopeful
    I hope you are right.
  • Great day
    Folks, this is a GREAT day for Indianapolis. We validated that a local tech company can grow, IPO and then get bought in a multi-BILLION dollar deal. A lot of those dollars are going to be reinvested in the growth of ExactTarget and by the founders/execs, likely into other tech companies and ventures, and the knowledge, brainpower, etc. of hundreds will be leveraged for other opportunities. This is not about the P.O. Box of the company HQ. This is a flat earth people. This deal will help springboard the growth of jobs and new tech companies in the City!
    • Sad Day
      What a sad day for Indianapolis. We just cannot keep corporate headquarters here. I am dreading the day (and we all know its coming) for Lilly to be bought out.
    • Indy Jobs
      I'm afraid for my former co-workers who may lose their jobs at the end of this acquisition. Plus, I worry about jobs moving away from Indianapolis due to this acquisition.
    • IBJ, if you would,
      do an analysis on how many corporate HQs have left Indianapolis over the last decade, what our tax incentive outlays have been to get them to those exit strategies, and what the net benefits have been to their destination cities. I need an informed opinion on this. Though I am a little nervous about what you may reveal...
    • Extinguishing the flame
      1. If you don't know what salesforce.com is (and how they have $2.5B); and 2. If you think ExactTarget is a "spam" company; Then you have no basis nor reason to be commenting on this story. Please move along.
    • Overpaid
      Wow. I suppose some congratulations are in order for the newly rich shareholders of ExactTarget. Just a couple rhetorical questions: (1) What the hell is salesforce.com and how did they get $2.5B? (2) What makes exacttarget, an email spam company, so attractive?
      • Not Microsoft
        I always thought it would be Microsoft. Wow. Congrats ExactTarget! Well deserved. Like Derek above, I'm not optimistic as to what this does to the fledgling tech community here.
      • Wild valuation
        2500/75...that's 30x gross revenue valuation and negative infinity profit multiplier. Granted I'm using 2012 revenue numbers. Indy jobs...poof! Thanks for playing!

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